Rate-sensitive stocks surge on more dovish policy optimism

By: | Published: December 13, 2018 2:17 AM

Shares of interest rate-sensitive companies rallied on Wednesday amid optimism of a more dovish monetary policy following the appointment of Shaktikanta Das as the new governor of the RBI.

sensex, niftyHero MotoCorp rallied the most on both the Sensex and Nifty on Wednesday.

Shares of interest rate-sensitive companies rallied on Wednesday amid optimism of a more dovish monetary policy following the appointment of Shaktikanta Das as the new governor of the RBI.

The Nifty Realty index rallied as much as 4.4% to clock its biggest single-day gains in 16 months, while the Nifty Auto index gained 3.6%, and the Bank Nifty rose 1.8%.

Hero MotoCorp rallied the most on both the Sensex and Nifty on Wednesday. The stock of the country’s largest two-wheeler manufacturer rose as much as 7.2% on NSE to post its biggest percentage gains since September 2013.

That was followed by Eicher Motors and Motherson Sumi Systems, both gained 4.8% each. While Tata Motors rose 3.8%, Bajaj Auto and Mahindra & Mahindra surged about 4%.

Among members of the Nifty Realty index, Indiabulls Real Estate rose 9.9%, while Godrej Properties rallied 5.6%. Phoenix Mills, DLF and Brigade Enterprises gained up to 5.07% on NSE.

Analysts at Kotak Institutional Equities observe the sudden resignation of Urjit Patel as RBI governor seems to have perceived casually by the market. Patel had resigned on Monday, citing personal reasons for his sudden exit.

Reacting to the appointment of new governor, the bonds too surged. Marking its second day of gains, the yield on 10-year bonds dropped 12 basis points to 7.41%. “The market perhaps believes that the departure of the RBI governor could lead to a relaxation in certain regulations for the banking sector and a more liberal monetary policy,” Kotak Institutional Equities wrote in a note. Liberal monetary policy is perceived to be a relief for automakers and real estate firms which have been battling a fall in sales due to sluggish economic growth, high interest rates, and an increase in raw material and fuel prices.

Despite November being a festive month, Hero MotoCorp had posted less than 1% increase in its sales. “The industry witnessed conservative sales off-take during the previous couple of months owing to issues like increase in insurance costs before the festive season and overall low key market sentiment. However, sales picked up in the last few days of the festive season,” the company said during the announcement of November sales numbers.

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